Developer contributions: reform with more acronyms
The objective that developers should contribute towards the costs of providing the infrastructure required to support their developments has proved surprisingly hard to implement. Following concerns about the effectiveness of the current twin- track Community Infrastructure Levy (CIL) and Section 106 system, a government commissioned review of developer contributions was published in February.
- CIL adoption remains patchy and concentrated in more affluent areas with higher land values. In areas prioritising the delivery of affordable housing (not funded through CIL) there is lower adoption and greater reliance on Section 106 agreements.
- The number and complexity of exemptions and reliefs has reduced anticipated CIL receipts and risks higher rates being imposed on those developments that remain liable.
- The CIL charge setting and implementation process can be lengthy and expensive and there is a perception of opaqueness regarding how funds are spent.
- The Regulation 123 lists (published by authorities listing the infrastructure that CIL can fund) vary significantly, limiting their usefulness
- CIL has not achieved its objectives and should be replaced by the following:
- A low level Local Infrastructure Tariff (LIT) applied universally to 'development' (retaining the CIL definition) and with fewer reliefs and exemptions than under CIL to boost revenue take. "Small developments" (10 units or less) would only pay LIT and no other tariffs. LIT would be calculated using a national formula based on local market values at a rate of "£x" per square metre; Regulation 123 lists should be abolished with authorities free to spend LIT on any infrastructure identified in their infrastructure plans.
- For "large developments" (over 10 units) authorities would use section 106 obligations to secure the provision of infrastructure (subject to the current 'acceptability' tests). Restrictions limiting pooling of more than five section 106 payments should be abolished given their complexity and failure to persuade authorities to adopt CIL. The provision of affordable housing would continue under Section 106 agreements.
- Development requiring infrastructure across a "Combined Authority" would be funded by a Strategic Infrastructure Tariff (SIT), similar to the London Mayoral CIL for Crossrail. A SIT would need to be at a sufficiently low level so as not to affect viability and take into account any LIT.
While the Government's promise to 'fix our broken housing market' via its Housing White Paper may have grabbed the headlines, it is easy to overlook a fundamental review of a system which is failing to deliver development. Original impact assessments suggested that CIL would raise between £4.7 and £6.8 billion over a ten year period; but many authorities are finding receipts to be as little as 50% of expected levels.
CIL was intended to be a fairer, faster, clearer and more certain system; it is failing but the proposed LIT changes might go a long way to remedying this.